Air hub goal eclipses fears

Singapore’s institutions were cagey about the prospect of a new
Qantas
-backed airline on Friday, while analysts raised questions about the city state’s willingness to approve such an airline and the logistics of making it work.

Singapore Airlines declined to comment, saying it would be inappropriate to do so when Qantas itself had not confirmed the venture. However, the Singapore carrier is thought to be sanguine about the idea of the government increasing access for offshore airlines, feeling that it already faces intense competition from Asian or global airlines on almost every route it flies.

Changi Airport spokesman Ivan Tan said it would be “premature" to comment and any application for an air operator certificate would be handled by the Civil Aviation Authority of Singapore. It did not respond to the Weekend Financial Review’s inquiries.

But Singapore state insiders said they did not expect any major hurdles for Qantas to set up, as long as it followed the same ownership structure as applies to Jetstar Asia in which 49 per cent of the airline is held by Qantas and 51 per cent by a Singaporean.

Analysts said, however, Singapore would be likely to expect something in return for approval. “The Singapore government has said its priority is to promote Singapore as an air hub," said Siva Govindasamy, Singapore-based Asia managing editor of Flightglobal Group. “A few years ago, that marked a slight change in tack. While Singapore Airlines is still an important part of the strategy, it is not the main part – that is [the airport] Changi."

Consequently, Singapore could be amenable to a new airline, but approval “I think, would lead to objections from airlines based here, chiefly Singapore Airlines," Mr Govindasamy said. “And that could lead to a quid pro quo where Singapore Airlines could say, ‘We allowed you guys to set up here, why can’t we do something in Australia?’" Singapore Airlines has long coveted greater access to trans-Pacific routes.

CLSA head of transport and infrastructure Robert Bruce said that the city state “would be supportive of any new airlines that are going to be based out of Singapore." He said its support for low-cost carriers over the past five years “has assisted in Singapore’s major strategic focus of growing as a tourism hub and making Changi one of the most successful airport hubs in the world".

Singapore was increasingly aware of the risk of losing its hub status to long-haul carriers in the Middle East, “which have developed an ability to overfly Singapore", he said, and that fear would fuel support for new, Singapore-based airlines.

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Others were less sure. “The only bit of it that’s surprising is that the Singaporeans would allow them to do it," said Peter Harbison, Centre for Asia Pacific Aviation chairman, who described the method of gaining entry – less than 50 per cent ownership – as “a side door".

“Allowing a flag carrier in would be quite a substantial step up in terms of the liberalisation process," he said. “When Qantas Asia, or whatever it’s called, aircraft are flying out of Singapore, it’s operating on Singapore bilateral rights and designated as a Singapore carrier [which] Singapore Airlines won’t like at all. [It] will be up against Singapore Airlines in bidding for slots."

The Australian government rejection of Singapore Exchange’s bid for ASX Ltd may influence Singapore’s decision, although the situations are different: Singapore Exchange proposed a takeover (subsequently realigned as a merger), while Qantas would simply be launching a business in which it is a minority shareholder.